United Kingdom

Brodies LLP | Lindsay Lee | James Wilson | Evan Adair

As the Moveable Transactions (Scotland) Act 2023 (the “MTA”) comes into force on 1 April 2025, there is a significant opportunity for businesses and financial institutions operating in Scotland.

The Reform

The MTA introduces wholesale reform to the means by which moveable property – including physical assets from vehicles to livestock, rights to payment such as rent, intellectual property, shares and more – can be assigned/pledged from one party to another and be used to secure debt. Three of the most significant of these reforms include:

  1. The Statutory Pledge The MTA introduces a new form of security, the Statutory Pledge, which can be created over certain types of moveable property (including shares) by registration rather than delivery or transfer;
  2. Modernised Intimation The MTA allows electronic communication to be used to intimate to debtors that their obligation to pay has been assigned to a new creditor; and
  3. Assignation by Registration The MTA also allows obligations to be assigned by registration, removing the need for direct intimation to debtors altogether.

The Opportunity

In preparing and recommending the draft Bill which formed the basis of the MTA, the Scottish Law Commission concluded that their aim was ‘to improve access to finance in Scotland and benefit the Scottish economy by reforming the law of moveable transactions’.

By creating the new Statutory Pledge and simplifying and modernising processes for creating fixed security over moveables, the MTA has the potential to bring significant benefits to parties raising and securing finance. As we have blogged previously, these opportunities extend to corporate entities generally, including those operating in and financing the real estate sector, and also to individuals and partnerships. The now-confirmed extension of the Statutory Pledge to shares and other financial instruments, meaning that fixed security can be taken over the shares by registration, without the shares having to be transferred to the secured creditor, is also likely to be of particular benefit when compared with the current alternative.

This article first appeared on Lexology | Source